Multinational corporations (MNCs) have evolved significantly over the years in terms of their coordination and

control mechanisms. The evolution can be traced back to the early 20th century when MNCs were mainly
focused on exporting goods and services to foreign markets. Coordination and control during this period were
primarily achieved through direct ownership and control of foreign subsidiaries. The historical evolution of the
international environment and the corresponding pattern of coordination and control mechanisms used by
MNCs are summarized in the table.
The period between 1920 and 1950 was marked by significant political changes around the world, including
the aftermath of World War I, the rise of totalitarian regimes in Europe, the Great Depression, and World War II.
These changes had a profound impact on international competition and the way countries interacted with each
other.
One of the key political changes during this period was the rise of nationalism and protectionism in many
countries. Many governments implemented policies that aimed to protect their domestic industries from foreign
competition, such as high tariffs and import quotas. This made it more difficult for businesses to compete
internationally and encouraged competition on a country-by-country basis.
Overall, the political changes during the period between 1920 and 1950 had a negative impact on international
competition and encouraged competition on a country-by-country basis. It wasn't until after World War II that
international cooperation and competition began to increase again, with the creation of international
organizations such as the United Nations and the World Trade Organization.
Competition in each country is essentially independent of competition in other countries
The strategic response to environmental imperatives was the establishment of semi-autonomous businesses
within each country. The management of a federation of semiautonomous firms needed little coordination and
control. MNCs managed their foreign subsidiaries as a “portfolio” of investments. As long as the subsidiaries
were generating earnings, they were left to the discretion of expatriate managers. Direct reporting of subsidiary
managers to the head of the MNC was a formal means of control exercised by headquarters. Subsidiaries
supplied the headquarters with periodic financial reports, assuring headquarters that they were keeping in line
with the profit objectives of the MNC.
The international environment during Period II (1950–1980) represented a reverse of the conditions in the
previous period. Economic and political forces favored international competition. Advancements in production
technologies increased economies of scale. Decreased transportation and communication costs, along with
economies of scale, allowed concentration of production in low-cost countries. These developments combined
with the easing of protectionist barriers to increase international competition. MNCs responded by adopting an
international strategy in which decision making was highly centralized and foreign subsidiaries were tightly
controlled from headquarters. In terms of control, the MNCs relied on formal mechanisms, centered on
budgeting, and on standardized programs in manufacturing and marketing. In addition to frequent financial
reports, subsidiaries provided the headquarters with reports on all major functional areas. Formalization and
standardization of policies, rules, and procedures strengthened headquarters’ tight output control over
subsidiaries’ operations.
Because of increased global competition and radically changing global business environments, the need to flexibly
manage subsidiaries (or business units) has become more significant; the requirement to centralize and decentralize
interorganizational control and coordination has increased. Technological developments have resulted in the
globalization/standardization of business and competition in many industries. On the other hand, many governments
demand that firms invest locally to create jobs, transfer technology, and contribute to the balance of payments. These
factors plus a rise in nontariff barriers and protectionist tendencies called for local responsiveness. In turn, the
contradictory demands of global strategies and local responsiveness required a higher level of coordination and control.
The firms discovered that the handsoff approach that relied on formal control and coordination mechanisms under the
multinational and global strategy was inadequate. Recognizing the need for flexibility and responsiveness, they instituted
both formal and informal control mechanisms. In addition to the formal control and coordination mechanisms, firms are
using informal and subtle means that overlap the existing organizational structure and formal reporting procedures.
Included among the new control mechanisms are teams, task forces, committees, and integrators. Additionally, the free
flow of informal communication among all managers— from the headquarters to subsidiaries and vice versa and among
the foreign subsidiaries—supplements the formal communication channels. Philosophical changes at the headquarters
allow the firms to offer career paths that enable all managers, regardless of their country of origin, to advance to
positions previously reserved for home country executives. In doing so, the firms create a corporate culture that
effectively controls managerial actions without the reliance on formal rules and procedures. Acculturation of these
managers, through continuous assignments to key positions throughout the global operation of the firms, works to
develop a strong corporate culture and induce the internalization of organizational objectives, values and beliefs, and the
corresponding policies and procedures

Today, MNCs continue to evolve their coordination and control mechanisms, with a greater focus on
sustainability and social responsibility. Many MNCs are adopting a more stakeholder-oriented approach to
management, recognizing the importance of engaging with a wide range of stakeholders, including customers,
employees, suppliers, and communities.
Overall, the evolution of coordination and control mechanisms of MNCs has been driven by a combination of
technological advancements, changing market conditions, and shifting societal expectations. MNCs will
continue to adapt and evolve as they navigate the challenges and opportunities of a rapidly changing global
business environment.

compare the coordination of mncs (multidomestic, international and global)

MNCs can be classified into three categories based on the degree of coordination and control across their global
operations: multidomestic, international, and global.
Multidomestic MNCs: These are MNCs that have a decentralized organizational structure, with significant
autonomy given to their regional subsidiaries to operate independently in local markets. Coordination and
control are largely decentralized, and each subsidiary operates as a separate entity. This approach allows MNCs
to be more responsive to local market conditions and customer needs. Coordination is mainly achieved through
the sharing of best practices and knowledge across different subsidiaries. Examples of multidomestic MNCs
include Unilever, Nestle, and Procter & Gamble.
International MNCs: These are MNCs that have a more centralized organizational structure, with greater
coordination and control exercised by the headquarters. Decision-making power is more centralized, and the
subsidiaries operate in a more integrated manner. This approach allows MNCs to achieve economies of scale
and greater efficiency in their global operations. Coordination is mainly achieved through a centralized
organizational structure, communication channels, and standardized processes. Examples of international MNCs
include IBM, Ford, and Coca-Cola.
Global MNCs: These are MNCs that have a highly centralized organizational structure, with a strong focus on
global integration and standardization. Global MNCs have a single global strategy that is implemented across
all regions and subsidiaries. This approach allows MNCs to achieve maximum efficiency and cost savings in
their global operations. Coordination is mainly achieved through a centralized organizational structure,
communication channels, and standardized processes. Examples of global MNCs include Apple, Google, and
Microsoft.
In summary, multidomestic MNCs have a decentralized organizational structure, international MNCs have a
more centralized structure, and global MNCs have a highly centralized structure. The level of coordination and
control across their global operations varies depending on the type of MNC.
How do language and cultural differences a problem of mncs control
Language and cultural differences can pose significant challenges for MNCs in terms of coordination and
control of their global operations. These challenges can arise in several ways:
Communication: MNCs need to communicate effectively across different regions and subsidiaries to ensure that
everyone is aligned with the company's goals and objectives. However, language barriers can make
communication difficult and lead to misunderstandings. This can result in delays, mistakes, and even conflicts,
which can negatively impact the company's performance.
Cultural differences: Different cultures have different ways of doing things, and what works in one country may
not work in another. MNCs need to be aware of these differences and adapt their management practices
accordingly. Failure to do so can result in cultural clashes, low morale, and high turnover rates.
Control: MNCs need to ensure that their subsidiaries are adhering to the company's standards and policies.
However, cultural differences can make it difficult to enforce these standards, as some practices may be
considered acceptable in one culture but not in another. This can lead to a lack of control and consistency across
the company's global operations.
To address these challenges, MNCs need to develop strategies that take into account the language and cultural
differences across their global operations. This may involve:
Language training: MNCs can provide language training to their employees to help them communicate
effectively with colleagues from different regions and subsidiaries.
Cultural awareness training: MNCs can provide cultural awareness training to their employees to help them
understand the cultural differences that exist across different regions and subsidiaries.
Localizing management practices: MNCs can adapt their management practices to fit the cultural norms and
practices of different regions and subsidiaries.
Developing a diverse workforce: MNCs can hire employees from different cultural backgrounds to ensure that
their global operations are more diverse and inclusive.
Overall, MNCs need to recognize the importance of language and cultural differences and develop strategies to
manage these challenges effectively to ensure the success of their global operations.
How do geographical distance a problem of mncs control
Geographical distance can pose several challenges for MNCs in terms of coordination and control of their
global operations. These challenges can arise in several ways:
Communication: Geographical distance can make it difficult for MNCs to communicate effectively with their
subsidiaries located in different parts of the world. The time zone differences can make it challenging to hold
meetings and make decisions in a timely manner. Additionally, language barriers can make communication
difficult and lead to misunderstandings.
Coordination: Geographical distance can make it difficult for MNCs to coordinate their global operations. For
example, if a product needs to be developed and manufactured in different locations, it can be challenging to
ensure that everyone is working together towards the same goal.
Infrastructure: The infrastructure in some regions may not be as developed as in others, which can make it
difficult to transport goods and access reliable communication networks. This can lead to delays and increased
costs.
Cultural differences: Geographical distance can exacerbate cultural differences, making it difficult for MNCs to
ensure that their subsidiaries are adhering to the company's standards and policies. Different cultures have
different ways of doing things, and what works in one country may not work in another.
To address these challenges, MNCs need to develop strategies that take into account the geographical distance
between their different subsidiaries. This may involve:
Leveraging technology: MNCs can use technology to facilitate communication and coordination across their
global operations. For example, video conferencing, instant messaging, and collaboration tools can help bridge
the geographical distance between different subsidiaries.
Centralizing decision-making: MNCs can centralize decision-making to ensure that everyone is working
towards the same goals. This can help overcome the challenges posed by geographical distance.
Localizing management practices: MNCs can adapt their management practices to fit the cultural norms and
practices of different regions and subsidiaries. This can help ensure that everyone is on the same page and
working towards the same goals.
Developing a diverse workforce: MNCs can hire employees from different cultural backgrounds to ensure that
their global operations are more diverse and inclusive. This can help overcome the challenges posed by cultural
differences.
Overall, MNCs need to recognize the importance of geographical distance and develop strategies to manage
these challenges effectively to ensure the success of their global operations.
How do legal differences a problem of mncs control
Legal differences can pose significant challenges for MNCs in terms of coordination and control of their global
operations. These challenges can arise in several ways:
Compliance: MNCs need to comply with the legal and regulatory requirements in each country where they
operate. However, the laws and regulations may differ significantly between countries, making it difficult to
ensure compliance.
Risk: Legal differences can increase the risk of non-compliance, which can lead to fines, legal action, and
damage to the company's reputation.
Contracts: MNCs need to negotiate and manage contracts with suppliers, customers, and other stakeholders in
different countries. Legal differences can make it difficult to negotiate and manage these contracts effectively.
Intellectual property: MNCs need to protect their intellectual property in different countries. However, the laws
and regulations governing intellectual property may differ significantly between countries, making it difficult to
ensure adequate protection.
To address these challenges, MNCs need to develop strategies that take into account the legal differences
between different countries. This may involve:
Conducting due diligence: MNCs need to conduct due diligence to ensure that they understand the legal and
regulatory requirements in each country where they operate.
Building relationships: MNCs can build relationships with local regulators and legal experts to better
understand the legal landscape in different countries.
Standardizing processes: MNCs can standardize their processes to ensure compliance with legal and regulatory
requirements across different countries.
Hiring local experts: MNCs can hire local legal experts to help navigate the legal landscape in different
countries and ensure compliance with local laws and regulations.
Overall, MNCs need to recognize the importance of legal differences and develop strategies to manage these
challenges effectively to ensure the success of their global operations.
How do security issues a problem of mncs control
Security issues can pose significant challenges for MNCs in terms of coordination and control of their global
operations. These challenges can arise in several ways:
Cybersecurity: MNCs are increasingly reliant on digital technologies to manage their global operations.
However, this also makes them vulnerable to cyber-attacks, which can compromise their sensitive data and
systems.
Physical security: MNCs need to ensure the physical security of their assets, employees, and operations in
different countries. This can be challenging in regions with high levels of crime, political instability, or
terrorism.
Supply chain security: MNCs need to ensure the security of their supply chains, which can involve managing
risks related to theft, fraud, counterfeiting, and smuggling.
Reputation: Security issues can damage the reputation of MNCs and lead to a loss of customer trust and loyalty.
To address these challenges, MNCs need to develop strategies that take into account the security risks in
different countries. This may involve:
Conducting risk assessments: MNCs need to conduct risk assessments to identify potential security risks in
different countries and develop plans to manage these risks.
Implementing security protocols: MNCs need to implement security protocols to protect their digital and
physical assets, including firewalls, encryption, access controls, and surveillance systems.
Developing contingency plans: MNCs need to develop contingency plans to respond to security incidents, such
as cyber-attacks, natural disasters, or political instability.
Building relationships: MNCs can build relationships with local law enforcement, security experts, and other
stakeholders to better understand the security landscape in different countries and identify potential risks.
Overall, MNCs need to recognize the importance of security issues and develop strategies to manage these
challenges effectively to ensure the success of their global operations.
How do intrafirm business transaction a problem of mncs control
Intrafirm business transactions can pose significant challenges for MNCs in terms of coordination and control
of their global operations. These challenges can arise in several ways:
Transfer pricing: MNCs need to set prices for goods and services that are transferred between their different
subsidiaries in different countries. However, setting transfer prices that are fair and comply with local tax laws
and regulations can be complex.
Currency risk: Intrafirm transactions can expose MNCs to currency risk, particularly when the transactions
involve different currencies. This can impact the profitability of the company and lead to financial losses.
Information sharing: Intrafirm transactions require the sharing of sensitive financial and commercial
information between different subsidiaries of the MNC. However, ensuring the confidentiality of this
information can be challenging, particularly when dealing with different legal and regulatory regimes.
Compliance: Intrafirm transactions must comply with local laws and regulations in each country where they
occur. However, compliance can be challenging when dealing with different legal and regulatory regimes.
To address these challenges, MNCs need to develop strategies that take into account the complexity of intrafirm
transactions. This may involve:
Developing transfer pricing policies: MNCs need to develop transfer pricing policies that comply with local tax
laws and regulations and ensure that prices are set fairly.
Hedging currency risk: MNCs can hedge against currency risk by using financial instruments, such as forward
contracts or options, to manage exposure to currency fluctuations.
Implementing information security protocols: MNCs need to implement information security protocols to
ensure the confidentiality of sensitive financial and commercial information shared between different
subsidiaries.
Conducting due diligence: MNCs need to conduct due diligence to ensure compliance with local laws and
regulations in each country where they operate.
Overall, MNCs need to recognize the importance of intrafirm business transactions and develop strategies to
manage these challenges effectively to ensure the success of their global operations.